Preparing to Purchase at Auction - Getting Organised
A list of things to think about in preparation for purchasing at auction.
Go to auctions
Visiting the auction rooms a few times before going with the intention of bidding is highly recommended. You need to experience the atmosphere and procedure before taking the leap into purchasing. Take a good look around the room, watch the bidders as well as the auctioneer and get a feel for what happens.
It is important that you are fully aware of the auctions’ terms and regulations.
First and foremost remember that when you make a winning bid you have entered a binding contract and are legally required to pay the amount you bid.
In order to proceed with a purchase you are required to produce identification – you will therefore need to take this with you to the auction. Read the instructions, usually printed in the catalogue or available from the auction house, regarding what forms of identification are required.
If you are unable to attend the auction you are still able to bid over the telephone or by proxy – these do however require prior arrangements to be made with the auction house so we would advise that you contact them to discuss requirements and terms.
Remember, if you make a successful bid at auction that is not all you will pay before the property is yours. Some people do not take in to account – legal fees, stamp duty, surveys etc. Others are not aware that auctioneers will generally add an administration fee, not inclusive of VAT, and that the purchase price of commercial properties will generally also need to have the VAT added.
Sort the finance
One of the benefits of buying at auction is the speed in which the sale will go through, however this does mean that you need to ensure you have the appropriate finance in place before making a purchase.
If you make a winning bid the auctioneer will require a 10% deposit on the day, so you must make sure that you have the finances in place before attending. Sales go through within 28 days so you will also need to have access to the remaining 90% of the purchase price – remember: if this is not available at the required time you could lose your 10% deposit, therefore if you are going to be borrowing it is best to arrange a mortgage in principal before buying at auction.
Auction houses produce catalogues of the lots for sale weeks in advance – get a copy from them and find the properties/land that you are interested in, ensuring that you read the details thoroughly.
Remember – you can sign up to the auction houses’ mailing lists to make sure that you receive future catalogues.
View the lots that you have identified as being potential purchases. You may find that it is not what you expected, for example that it needs more work than you bargained for. This also gives you a chance to explore the area/neighbourhood and check the distance to amenities – if you are looking at purchasing a family home either for yourself or to sell/let you may decide the ‘local’ schools are just too far away or that you’d rather have a shop within walking distance for example. You may also find other things spring to mind when viewing such as potential problems with parking or access to the site if you are planning any renovation/development.
We would recommend that you research the property as much as possible – do not be worried about approaching local estate agents or shopkeepers, publicans etc. These people will be able to provide an insight to the area that you will not find on paper.
Also remember to look at the local market, check what local estate agents have for sale and the asking prices of equivalent properties.
Get appropriate professional advice
Within the catalogue there will be all of the terms and conditions – read these carefully, making sure that you understand it fully.
A legal pack is made for each lot, ordinarily prepared by the seller’s solicitor. You can obtain these packs from the auctioneer for any property that you are thinking of buying. Read these comprehensively and seek legal advice if necessary to ensure that the information is clear in your mind.
As with any other sale of property you will need to consider the property/land searches and surveys.
Any structural or title issues or restrictive covenants (legal constraints that state what can and can’t be done to a plot of land or property – eg: restraints on a listed building or existing planning permission for a plot) that are uncovered may well affect the amount you are willing to pay.
With this in mind it is vital that you have a good network of professionals behind you – a good solicitor and, if appropriate, chartered surveyor you can rely on for advice is essential.
Making an offer
You are able to bid in advance of the auction and in some instances the seller will agree to sell prior to auction.
Bear this in mind when looking at lots – it is quite possible that you could get to the auction and find that the lot you are interested in has already been sold.
Set your limit
Everyone has heard it said before but it really is important that you set a maximum price that you are willing to pay, and stick to it. It is easy to get carried away at an auction and to get caught up in the atmosphere.
For information regarding the day itself you may want to take a look at: Preparing to Purchase at Auction - The Big Day
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